Mitsubishi Estate Company. Limited

If real estate market conditions deteriorate due to a downturn in the domestic and overseas economies, there is a risk of rising vacancy rates in the Tokyo office leasing market and sluggish sales of condominiums. In particular, mixed-use development and redevelopment projects tend to be more significantly affected by market downturns because they involve long development periods and large-scale investment. The Group is focusing on progress management, but recognizes the risk of adverse impact on its business performance.

The Bank of Japan has indicated a monetary policy stance involving changes to its policy interest rate under the 2% price stability target, and domestic interest rates may rise due to policy changes, deterioration in the supply-demand balance of government bonds, and developments in international financial and capital markets and foreign exchange markets. In addition, when raising foreign currency funds for overseas investments, there is a risk that interest rates on the funding currency may rise due to economic conditions in the countries where investments are made. Rising interest rates may affect the Group's business performance and financial condition through increased funding costs.

The Group's operations are affected by foreign exchange rate fluctuations, and in a yen appreciation phase, the yen-equivalent value of foreign currency-denominated transactions decreases. When preparing consolidated financial statements, foreign currency-denominated assets and liabilities are translated into yen, so there is a risk that the yen-translated value will fluctuate even if the value in local currency remains unchanged. As overseas business expands, the impact of exchange rate fluctuations on business performance and financial condition may increase.

If material prices rise due to soaring raw material and crude oil prices caused by domestic and overseas factors, there is a risk that the increased costs cannot necessarily be passed on to sales prices or rents in the real estate development business. Increased costs may put pressure on profitability and adversely affect the Group's business performance. The Group is working on cost management, but there are limits to its ability to respond to price fluctuations caused by external factors.

If natural disasters such as earthquakes, storms, and floods, or man-made disasters such as accidents, fires, wars, or terrorism occur, business interruption may be unavoidable at commercial facilities, hotels, airports, and other owned or operated facilities. The Group is working on BCP (business continuity plan) measures, but depending on the degree of urgency, continuing operations may become difficult in some cases. In addition, if there are deficiencies in responding to pandemics, typhoons, or other events, safety management risks and reputational risks may materialize and affect business performance.

The Group handles a large amount of confidential information, including personal information, in its various businesses in Japan and overseas, and there is a risk of information security incidents occurring due to cyberattacks, virus infections, and other causes. If confidential information is leaked externally or system risks materialize, business performance may be affected through the occurrence of legal liability and damage to reputation. The Group strives to comply with relevant laws and regulations, including the Act on the Protection of Personal Information, and to ensure appropriate handling of information.

If there are deficiencies in safety management, quality management, or process management efforts and responses at operated facilities and properties under construction, this could lead to personal accidents or fires, food poisoning, and other incidents at commercial facilities, hotels, senior living facilities, airports, and other locations. There is a risk that the Group's business performance and other aspects may be affected through loss of customer trust and the occurrence of legal liability. The Group is thoroughly implementing various management measures, but continuous efforts are required to prepare for any possible deficiencies.

The Group holds listed and unlisted securities, and if there is a general and significant decline in stock prices, there is a risk that impairment losses or valuation losses may occur on the securities held. This may adversely affect the Group's business performance and financial condition. Managing the held equity securities portfolio in response to fluctuations in market conditions is an important issue.

The Group is working on appropriate labor management, eliminating harassment, and promoting diversity, but if there are deficiencies in compliance with various regulations or in appropriate responses, this could adversely affect business operations. With the expansion of overseas business under the "Long-Term Management Plan 2030," the proportion of locally hired employees at each overseas local subsidiary is expected to increase, making the management of local subsidiary employees more important than before. Developing management systems for local subsidiaries is recognized as a challenge.

The Group has identified sustainability-related risks and opportunities as an important management theme, and if these risks materialize, they may affect business performance over the medium to long term. Addressing important issues in sustainability management, including responding to climate change and social issues, is required, and delays in response could lead to stricter regulation and lower investor evaluation. Details are described in the sustainability-related strategy.